Increasingly, commercial transactions are conducted using a credit card or similar method for cashless transactions that access a line of credit extended to the purchaser. This increase in use has triggered an increase in the complexity of the process used to authorize the transactions, which has progressed to near real time authorization, and a need for contingencies that can result in a transaction being approved that otherwise would be declined.
Purchasers using cashless transactions vary from single personal consumers to businesses or corporations that establish a series of accounts to be used by employees conducting business. In either case, limitations are imposed on the accounts based on requirements from the financial institution issuing the transaction privileges and, in the case of accounts for businesses or corporations, the business or corporation itself. In a simple example, a bank will establish a credit limit for a credit card issued to an individual. In a different example, a corporation may limit the types of purchases that can be made on a specific card, for example, travel expenses (transportation, lodging, restaurants).
Cashless transactions go through an authorization process, which results in either the purchase being approved or the purchase being disapproved, or declined. Essentially, the financial institution determines if it is willing to lend the purchaser money to complete the transaction. The authorization process may be conducted by the financial institution that owns the transaction account or that institution may contract with a third party to conduct the authorization process, an authorization agent. In either case, a record for each account is maintained that specifies the privileges and limitations associated with the account, an authorization record. Generally, funds are not transferred at the time of the authorization. Instead, the account is usually settled periodically.
In the simple example above, a merchant makes an authorization request when the individual card holder makes a purchase using the credit card. The authorization request will include the purchaser's account number and the amount of the transaction. The request may also include other information, such as a merchant category code (MCC) and a merchant identifier. The authorization agent compares the purchase amount against the available line of credit for that card (the extended line of credit less any outstanding charges against that line of credit). If the amount does not exceed the available line of credit, then the purchase is approved. Otherwise, the purchase is declined. Additionally, preliminary evaluations may be conducted, such as verifying that the card is valid and has not been stolen.
The MCC is a standard industry code established by the financial transactions services industry to partition goods and services into categories. Merchants will be assigned an MCC based on their primary business. MCCs are four digit numeric designations for businesses or types of goods and services. They are used in card processing as part of existing authorization controls. Merchant terminal systems are programmed to send the appropriate MCC with the authorization request.
These MCC categories can be used to further delineate purchase privileges and limitations. In the corporate credit card example above, the charges on the account can be limited to certain MCCs that pertain to transportation businesses (airlines, rental cars, gasoline, etc.), lodging, and restaurants. During the authorization process, an authorization request for that account would be compared against the permissible MCCs. Purchases from merchants with MCCs not extended privileges for that account would be declined, even if the purchase amount is within the available credit line for the account.
To facilitate this type of approval, the authorization agent or financial institution may group MCCs together, into MCC Groups (MCCG). An MCCG refers to a class of transactions that may have the same or similar MCCs, such as airline ticket purchases or hotel expenses. The MCCs in a particular MCCG may or may not be related. The business or corporation who establishes the accounts for its employees may define their own MCCGs. For example, MCCG “Sales” may contain the MCCs for office supplies, gasoline, and Hilton hotels. The MCCs in this group are unrelated in and of themselves; their only common characteristic is that they belong to the “Sales” MCCG.
Another type of limitation is a velocity accumulation limitation. A velocity is a transaction occurrence. An account may be limited to a number of transactions. Each time a transaction occurs, the current status of the velocity counter for an account is compared to the velocity limit associated with that account. If the accumulated velocity value is less than the velocity limit, the transaction is approved (subject to other limitations) and the velocity is increased by one.
The general authorization process in the prior art allows financial institutions and businesses and corporations establishing accounts for their employees to limit the scope of purchases for an account, either by dollar amount or merchant category, or both. Purchases outside the scope of the account are declined.
The prior art has addressed the complexities of cashless transactions and the authorization process. U.S. Pat. No. 5,991,750 to Watson recites a method and system for “pre-authorizing transactions that but for specific authorization, are otherwise proscribed.” U.S. Pat. No. 5,991,750, col. 3, 11. 33-34. This patent claims “authorizing said requested transaction when in conformity with both said at least one specified transaction parameter [i.e., a pre-authorization parameter] and said account transaction limitations.” Id. at col. 14, 11. 27-30 (emphasis added); see also id. at col. 15, 11. 34-38.
The prior art is unable to control a single event transaction authorization so that an unusual purchase of goods or services can be approved, even if the transaction parameters exceed the authorization limitations for the account. To date, the prior art requires the transaction to be within the transaction limitations.
What is needed is a means for approving transactions that are otherwise outside the scope of the account and would be declined or in other ways would affect the ability of the purchaser to use the account, such as having an unusual purchase affect the budget allowed for routine purchases.